Economic Impacts of Foreign Aid in Fragile States

Abstract

This report reviews available studies that evaluate the effects of international aid on the local economic conditions. It is presented in an annotated bibliography style that describes the key findings and methodology. It includes studies that analyse direct and/or indirect economic effects of local spending or operations within a country, and focus on fragile and conflict-affected countries. Given the time available for this review, it covers relevant studies that have been published since 2010. Twelve key studies are examined in this report. Five of the studies primarily focus on local spending of aid agencies and analyse their economic impacts (Koch & Schulpen, 2018; UNDP & UNHCR, 2015; Ramachandran & Walz, 2015; Durch, 2010; Carnahan et al., 2006). Five studies examine indirect economic effects of the presence of aid agencies (Bove & Elia, 2017; Caruso et al., 2017; Beber et al., 2016; Mosel & Henderson, 2015; Mvukiyehe & Samii, 2010). Two studies describe the economic impacts using qualitative case studies through perception surveys (Rolandsen, 2015; Ammitzbøll, & Tychsen, 2010). Only one study, by Ramachandran and Walz (2015), focuses on the overall spending of donors within a country, while other studies examine the spending from one or few interventions and agencies. These studies analyse different levels of economic outcomes: individual, sectoral and macro levels.